WASHINGTON — Senator Richard Burr, Republican of North Carolina, a
reliable friend of business on Capitol Hill and no one’s idea of a bomb
thrower, isn’t buying the apocalyptic warnings that a default on United
States government debt would lead to a global economic cataclysm.

“We always have enough money to pay our debt service,” said Mr. Burr,
who pointed to a stream of tax revenue flowing into the Treasury as he
shrugged off fears of a cascading financial crisis. “You’ve had the
federal government out of work for close to two weeks; that’s about $24
billion a month. Every month, you have enough saved in salaries alone
that you’re covering three-fifths, four-fifths of the total debt
service, about $35 billion a month. That’s manageable for some time.”

Now, it is crystal clear to anyone who has followed this that Sen. Burr is talking about the ability of the Treasury to *avoid* a default on US Government debt securities (i.e., the sort of debt covered by the debt ceiling) by using available cash to make interest payments. Is he saying, as per the headline, that "Default Wouldn't Be That Bad"? No. He is saying that a default on our publicly issued debt would not be necessary. That is a big difference, but it totally eludes the Times reporter. Let's help the Times out by quoting Reuters, a normally sympathetic left-wing source; they are using a Q&A format:

- The United States defaults when the money runs out, right?

It
depends how you define default. Historically, default is when a country
misses a payment to a creditor. The Obama administration says default
would include any missed payment, such as payments for public health insurance. The first really big bill due after hitting the debt ceiling is a $12 billion Social Security payment on October 23.

Markets
would be alarmed if it looked like bondholders would go unpaid for an
extended period, and might even panic if any government checks were
delayed. Many analysts think the administration would at least try to
prioritize payments on the national debt, but Treasury officials say
picking and choosing which bills to pay would be impossible.

That didn't look so hard, but it was too much for the Times editors. One might argue, as Obama supporters currently do, that any missed payment, whether it be to a state for Medicaid, a defense contractor for a satellite, or a bondholder for interest due, represents a '"default". But the breathless reporting describing the resulting financial apocalypse is based on the possible consequences of a default on a debt security, not a late payment to General Electric. That confusion benefits the fearmongerers, but I don't know why the Times is playing along on a front page story. Yes I do.

Of course, the Fearmongerer-in-Chief already told us the sky would fall with the sequester; the Times does manage to capture that point:

But the voices of denial are loud and persistent, with some Republicans
saying that the fallout from the continuing shutdown and the automatic,
across-the-board budget cuts known as sequestration has been less severe
than predicted.

However, the gist of the Times story is that Republicans simply don't believe the many experts predicting global warming, oops, financial meltdown. No attempt is made to explain why the prioritization of payments (the Mad Hatter Sequester) may or may not be practical or legal. A snippet:

Both men were counting on the prospect of a global economic meltdown to
help pull restive Republicans into line. On Wall Street, among business
leaders and in a vast majority of university economics departments, the
threat of significant instability resulting from a debt default is not
in question. But a lot of Republicans simply do not believe it.

A surprisingly broad section of the Republican Party
is convinced that a threat once taken as economic fact may not exist —
or at least may not be so serious. Some question the Treasury’s
drop-dead deadline of Oct. 17. Some government services might have to be
curtailed, they concede. “But I think the real date, candidly, the date
that’s highly problematic for our nation, is Nov. 1,” said Senator Bob
Corker, Republican of Tennessee.

Others say there is no deadline at all — that daily tax receipts would be more than enough to pay off Treasury bonds as they come due.

I should unchain my Inner Pedant and note that no one claims that incoming tax receipts are enough to "pay off" bonds as they come due. Tax receipts will be enough to pay off the interest on the bonds; the principal amount can be re-issued under the current debt ceiling. Gee, its almost like the reporter doesn't understand this.

But to be fair and balanced, the Times also recycles nonsense from Rand Paul without criticism or comment:

“It really is irresponsible of the president to try to scare the markets,” said Senator Rand Paul,
Republican of Kentucky. “If you don’t raise your debt ceiling, all
you’re saying is, ‘We’re going to be balancing our budget.’ So if you
put it in those terms, all these scary terms of, ‘Oh my goodness, the
world’s going to end’ — if we balance the budget, the world’s going to
end? Why don’t we spend what comes in?”

“If you propose it that way,” he said of not raising the debt limit,
“the American public will say that sounds like a pretty reasonable
idea.”

Well, yes and no. The budget will be in balance going forward, and the resulting fiscal drag will probably crush the economy. But set that nightmare aside - how, under the Paul cash-basis plan, do vendors get paid for their past work? My guess is that we have quite a few bills outstanding; unless Paul proposes to run a cash-basis surplus, there will never be funds to pay, e.g., GE for their hypothetical satellite.

Interestingly, and dare I say encouragingly, Obama seems to be aware of the difference himself, even if he is trying to confuse the rest of us:

“When I hear people trying to downplay the consequences of that, I think
that’s really irresponsible, and I’m happy to talk to any of them
individually and walk them through exactly why it’s irresponsible,” he
said. “And it’s particularly funny coming from Republicans who claim to
be champions of business. There’s no business person out here who thinks
this wouldn’t be a big deal, not one. You go to anywhere from Wall
Street to Main Street, and you ask a C.E.O. of a company or ask a
small-business person whether it’d be a big deal if the United States
government isn’t paying its bills on time. They’ll tell you it’s a big
deal. It would hurt.”

"Paying its bills" is much broader than paying its publicly held debt. I have no doubt that if Obama asked Jeff Immelt whether it was important that GE got paid on time Mr. Immelt would say yes. But that doesn't mean GE lacks the cash management resources to handle a late payment from a customer. Now, if the payment is going to be late forever, as implied by the Paul approach, yes, that is a different matter.

I am strangely confident that the Times has reporters and editors who understand these nuances. They should have moved this effort from the front page to the op-ed section. Or they should offer their readers a subscription to the Washington Post and the finework done by Brad Plumer, which includes a link to this CRS piece on Treasury cash management.

And in an interesting blend which misses the point while keeping hope alive we get this:

One point that seems to be getting left out of the mainstream/corporate
media coverage is that an economic crisis that results from defaulting
on US debt obligations will first and foremost wreck the 1%. The US
treasury bond is the lynchpin to the global financial system, a default
would first cause a panic attack in financial markets and the top 1% own
almost 50% of all financial assets. And given that the Federal Reserve
has already run out of tricks and is down to money printing it is
unlikely they would be at all effective in stopping a financial crisis
caused by default. In other words, default would be the end of the upper
class as we know it.

I think we all agree - the Republicans cited in the Times do - that defaulting on Treasury bonds, notes and bills would be a dreadful experiment.

Once that happens the states are never going to let Obamacare be closed down. They can pass more costs to others
The leftists have salted the entire Obamacare mess with ways to past the cost of every aspect of medical care on to some one else.

Prior to this Govt Shutdown it was conventional wisdom that a Govt Shutdown was something that was horrible and definitely to be avoided because it would clobber whatever party allowed it to happen, particularly Republicans.

My opinion now, after we've seen what a non-event a Govt Shutdown is, is that that meme has been busted wide open and in future a Govt Shutdown will not be something to be dreaded or avoided, and it'll be seen often, as least by fly over country, as an often welcome occurrence that ought to occur every now and then in order to experience how unnecessary so much of our Government is.

Anybody else think the Conventional Wisdom on Government Shutdowns is dead?

True, but does anyone outside of the small minority who ignore the DeMSM know about these outrages?

I think so, jimmyk, and for a number of reasons. Think of every person who had to put up with (or put asunder) a barricade at a pull-off on the GW Parkway during the rainstorms in DC or in front of an open-air national park or monument, or who got evicted from a home on land leased from the federal government. Think of the picture-takers I just mentioned; think of the concessionaires on federal lands who've lost money because their customers have been kept from them by threat of arrest. There are plenty of these people, and they're pretty widespread across the country; I think word of mouth will get the message out effectively in spite of a mute or biased MSM.

Per Daddy's point-- the 'Shutdown' hysteria is a loser for Obummer, and the Debt Ceiling hysteria may follow suit-- here's ZeroHedge's take on the unremarkable 10y T-Bond auction. Business as usual-- maybe the primary delers are just giddy that JanetY will throw the QE spigots wide open. The Wall Streeters and the parasite grifters like Maxine Waters both love the DEBT, the rest of us who work for a living, take it up....

Lyle@1:38-- spot on. In the 'short term' Janet will pump until we all drop... when do we drop? In the 'medium term' when the Fed completely loses control of interest rates, and the $20T debt generates $900B/ year in interest costs and there is a REAL DEFAULT by the USA. Good times good times.

jimmyk, not much chance. She is a trust fund heiress of the Trek Bicycle family who "ran" European operations (ie easily tied to dopers-r-us groups like the Tour de France, Lance Armstrong, etc). The Dems will clear the field for her because they expect her to self fund $10-14 million. She'll get no national help, WI Dems burned that channel in the recall. She'll get no union help, they have no money (heh) and have to try to hold onto house seats and state legislative offices post redistricting. The only thing they have against Walker is a lack of job growth, but right now WI is picking up steam and #1 in the near term economic forecast. Meanwhile, taxes get lower. Walker should have another big win, but 60% implies a lot of takers stay home.

Plenty of them, actually. They're not easy to find (and I haven't looked for them), but an extensive bibliography of them, with brief (thank God) excerpts, can be found in Nightmare of Ectasy: The Life and Art of Edward D. Wood, Jr. by Rudolph Grey (which I did look for, and bought about twenty years ago). The book is actually fascinating reading.

Gasoline is double what it was in 2008. Grain prices are at all time highs. The price of a gallon of milk has risen substantially. metals prices are still at all time highs. CODELCO has just raised next year's copper prices by 15% again. And the stock market is at an artificial high.

The markets are recognizing the inflation inherent in our policy already.

In China wages are rising rapidly. The age of cheep stuff is ending. The age of less expensive, poor quality stuff will replace it, but we will be paying more.

A very high percentage of our national debt is short term and needs refinancing. Lew is already on the hook for several hundred billion this week, I believe.

QE has always been highly problematic and now like a junkie, we need ever more of it to quell the economic demons. So the choice is to end QE or continue until the world no longer wants to buy our debt.

Obama is playing Russian Roulette with a semi-automatic pistol, in other words. Any way we look at it the results will be very unpleasant and Obama is fixing to blame the Republicans. With his sycophantic media he may get away with it.

Moody's Investor Services just flat out called Zero a bald faced liar. They say government wont default if debt ceiling is not raised, and the situation is much less serious than the confrontation in 2011.

Prepare for the IRS audit and the Holder lawsuit, you can not defy the tyrant...

Megyn Kelly's replacement, Gretchen Carlson, has on Bill O'Reilly as guest. Guess he doesn't get enough time on air to push his latest book.

I have to say that Gretchen looks a lot better now than she did on the Fox and Friends morning show. On that show she often looked like a female cargo pilot pulling a night turn through the Oakland Hub; dried out skin, hair like plastic straw, relentless uninspired banter, etc.

No Canadian in me, but I curled for a lot of years, including playing down for the Nationals and playing on a team from Minnesota for a few years. I truly love the sport - but don't live anywhere near curling ice these days.

Notice that nobody in the Pentagon has resigned in outrage over Preznit Pissy Pants and dumbass Hagel spitefully stiffing the families of the dead troops. How far down do you have to drill before you get to anybody who care about the soldiers?

I think I am on solid ground saying that our friend in ChiTown loves you all and misses commenting.

I'm with you NK. Here we are jabbering about Jazz/Rock drummers and our Jazz aficionado gal-pal in Chicago unable to say a single word. What a bummer.

Oh carp. Ad on TV sez Hannity tonight to interview Anthony Weiner. Can we please, please, please quit aiding this creep in trying to resurrect himself in some visible public capacity. There is nothing we can do that is more distressing to Anthony Weiner, nor more deserved by Anthony Weiner, than to ignore him.

Issa can hold all the hearings he wants; these outrages don't stop until Lerner and her ilk start enduring significant jail time and financial penalties which impoverish them. Boehner has to bang for a special prosecutor as if a quart of Kesslers and a carton of Old Golds depend on it happening.

GMax/JimmyK-- I didn't see the Moody's stuff in GMax's link, but I found the Hess note to investors. Thin gruel, nothing significant IMO.

Henry-- pretty thin gruel there too. I do note Issa has focused in on Lerner and Ingram as the HatchetHags used to jerk around the Tea Party applications. But how does he prove who gave them the orders (Jarrett, Axelrod, Obummer himself?)to do so? I'm not optimistic even immunity to the digusting Lerner will get the truth out.

In a memo being circulated on Capitol Hill Wednesday, Moody’s Investors Service offers “answers to frequently asked questions” about the government shutdown, now in its second week, and the federal debt limit. President Obama has said that, unless Congress acts to raise the $16.7 trillion limit by next Thursday, the nation will be at risk of default.

Not so, Moody’s says in the memo dated Oct. 7.

” We believe the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact,” the memo says. “The debt limit restricts government expenditures to the amount of its incoming revenues; it does not prohibit the government from servicing its debt. There is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.

The memo offers a starkly different view of the consequences of congressional inaction on the debt limit than is held by the White House, many policymakers and other financial analysts. During a press conference at the White House Tuesday, Obama said missing the Oct. 17 deadline would invite “economic chaos.”

The Moody’s memo goes on to argue that the situation is actually much less serious than in 2011, when the nation last faced a pitched battle over the debt limit.

“The budget deficit was considerably larger in 2011 than it is currently, so the magnitude of the necessary spending cuts needed after 17 October is lower now than it was then,” the memo says.

Treasury Department officials did not immediately respond to requests for comment.

If, as Obama said yesterday, that raising the debt ceiling doesn't contribute "one dime to the national debt", then why raise it?

Raising the debt ceiling doesn't raise the debt in the same sense that laying down on the railroad tracks doesn't get you hit by a train - it doesn't, but it's an awfully good first step, and it's hard to think of another reason why you'd do such a thing.

It depends how you define default. Historically, default is when a country misses a payment to a creditor. The Obama administration says default would include any missed payment

Whether the Republicans are contemplating a repeat of the San Francisco Earthquake of 1906 also depends on whether you define the term "San Francisco Earthquake of 1906" to include any missed payment by the federal government or stick to the historical usage of the phrase to refer only to the San Francisco Earthquake of 1906.

Forty four years ago today, the Illinois National Guard was called out to control the New Left maggot protestors supporting the Chicago Seven.

Now, the Chicago Seven and their political and ideological heirs, are in virtually complete control of the Dem Party and are trying to make it the whole country.

The idea these pseudo Marxist larvae will be defeated through the legitimate political process or with clean hands is as unrealistic as thinking Allende would go quietly.
At some point, now that they they have gained enough institutional strength to threaten our form of government, (and that's exactly what's at stake) they will have to be removed at some point, root and branch, by similar methods.

The progs who long for the tactics used to end the Soviet's final grasp at power have it half right.

From the AP poll, I saw that close to 80% had no direct experience with anything being closed by the feds or worked for the govt. so why would they be aware enough to be concerned with what the Spite House is really doing? It's not fully reported in the paper or on the regular evening news. What is heard are the hourly reports on how Pres. Flexible is castigating the GOP/Tea Party for destroying the country. That's a constant drum beat and it sticks.

At the same time, Ted Cruz is getting the full Gingrich-Palin demonizing. Will it be fatal?

DrJ has it right. Central NYS, an hour east of Syracuse. I don't flaunt that I'm in NY to save myself from political embarrassment, but since you are from MA, why not commiserate. My sister is right down the road from you in Worcester, and used to live next door in Wales.

"CRANSTON, R.I. -
Terence McAuliffe, the former chairman of the national Democratic Party, was one of hundreds of people who invested in variable annuities that used terminally ill patients as the annuitants."

Reid didn’t appreciate the company. As Gray leaned into Reid and demanded federal money start flowing so the District can pay its bills, Reid responded, “I’m on your side. Don’t screw this up.”

Reid was probably nervous because at the mayor’s earlier news conference, Gray had stood next to Republican congressman Darrell Issa as he criticized the Democratic-led Senate for holding up the District spending bill, which has already passed the House.

“Every worker and every citizen of the District of Columbia needs to be counted as essential,” Issa said.

The last thing Harry Reid wants are prominent African-American Democrats demanding he follow the precedent the Senate set last week by funding a stand-alone bill for Pentagon spending by picking another part of the government they want to fund separately.